Labour fears loss of Co-op’s £1m gift, not its loan



As pieces of political spin go, it was up there with the best – even if it concerned the dry subject of Labour’s banking facilities.

This morning, the BBC reported that it had “learnt” that the party was looking at ending its 80-year relationship with the Co-operative Bank. It was heavily implied that this was a Labour initiative caused, in part, by recent controversies at the bank which it no longer wished to be a part of.

But as with all things that are spun, there is a risk that they will unravel.

And by this afternoon, the party was facing charges that it had been rather economical with the actualité and that it was, in fact, the troubled Co-op that wanted to sever its relationship with Labour, and not the other way round.

Ever since US hedge funds forced the Co-operative Group to relinquish control of its banking arm last October, there have been strong suggestions that the new management was looking to end its long-standing relationship with Labour – to which it currently loans more than £1.2m.

And today, sources at the bank made it clear that far from Labour approaching it to transfer its loan elsewhere, it was the bank that told Labour it was no longer keen on its business.

“We are not looking at  big organisations any  more,” a source at the bank recently said. “We are looking to move non-core customers elsewhere.”

It is understood that in discussions, Co-op informed Labour it was going significantly to increase the charges in relation to the loan – triggering the move.

But what is difficult for Labour, in a political rather than a financial sense, is where the party intends to move its loan facility to.

Its general secretary, Iain McNicol, is understood to want to transfer it to a small financial institution called the Unity Trust Bank, with which the party already has a loan facility.

But, uncomfortably for Labour, Unity is owned and controlled by the trade unions, and Dave Prentis, the general secretary of Unison, is its president. While in reality this gives the unions no more say or control over the party than at present, it has given the Tories a new form of attack to suggest that Ed Miliband is in the pocket of union interests.

The switch will effectively draw a line under a financial relationship going back nearly a century. The co-operative movement and Labour joined parties in the 1920s and the link-up with the banking arm is believed to have started then.

The Conservative Party’s chairman, Grant Shapps, was quick off the mark to make hay of the new relationship. “These proposals would hand the trade unions even more control over Ed Miliband and the Labour Party,” he said.

“The unions already pick the candidates, buy the policies and choose the leader. Now Ed Miliband wants them to hold the purse strings as well.”

This is clearly nonsense but it could still be damaging. Labour stresses that the loans will be on a purely commercial basis, and given that unions are already major donors it does not change the relationship with the party in any way.

But there could be further problems ahead. It is still not clear whether the wider Co-operative Group will continue to make political donations to Labour, which it has done even during the past few years of turmoil.

The group makes donations of up to £1m a year to the party and to MPs including Ed Balls, the shadow Chancellor. If they should dry up, the results will be financially uncomfortable and will also need all the spin they can get.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Read Next

Daily catch-up: union bosses mobilise to try to prevent a Labour government

John Rentoul
Yvette Cooper campaigning in London at the launch of Labour’s women’s manifesto  

I want the Labour Party to lead a revolution in family support

Yvette Cooper
Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine